Strategy for Adopting Discontinuous Innovation - Coursework Example

Contents 1.Executive Summary 2 2.Introduction 2 2.1. Continuous and discontinuous innovation-A comparison 3 3.The Case 5 3.1.Impact of discontinuous innovation on the Competitors 6 4.Strategy for adopting discontinuous innovation 6 4.1.Radical Cannibalism 7 5.Conclusion 8 6.Cited Text 9 “Led Light Bulbs - Start saving money today with Led Light Bulbs!” 10 1. Executive Summary The paper tries to answer the three Ws of discontinuous innovation. That is it answers the what, why and when of discontinuous innovation. It also explains the situation at hand and proposes a solution to the problem. The first section of the paper tries to answer the question that what discontinuous innovation all about? It tries to explain it in terms of the market and describe the history. It also compares continuous and discontinuous innovation and the scenarios in which they are effective. The second section is inclined towards explaining the circumstances that the company is facing and the approach that it should adopt. The last section explains the risks that are involved with discontinuous innovation and what kind of approach we should adopt to achieve it. 2. Introduction Innovation is a creation that results from study and experimentation. In terms of business, innovative product is one that increases the benefits and decreases the costs. A successful innovation is one which makes the impossible possible. Then what is discontinuous innovation? Discontinuous innovation presents a very new concept to the customer, one that the customer has never experienced and thus customer has an extensive experience of learning and research. Another definition describes discontinuous innovation as entirely ‘new-to-the-world’ products, which are design, and manufactured to perform some function for which previously there were no products available in the market. A product that changes the stature or in other words ‘game’ of the company, we refer to it as discontinuous innovation. Data collected from twelve discontinuous innovation projects during 5 years from 10 mature firms reveals the difficulties or hurdles that they encountered during the transition from the Research and Development phase to the operating unit. For example, Hewlett-Packard's inkjet printer indicates a discontinuous innovation approach. Disposable diapers, first introduced by Procter & Gamble, decimated cloth diaper service providers. P&G owned the market for this product from the 1960's to the mid-1980. Film photography (by Kodak) eliminated glass plate photography, although it took over 15 years to do so. (Kaplan, S.M. (1999), "Discontinuous innovation and the growth paradox", Strategy & Leadership, Vol. 27 No.2) 2.1. Continuous and discontinuous innovation-A comparison In this section we endeavor to identify the differences between the two innovations which is extremely necessary to understand and make the right choices at the right times. Following are the basic features of continuous innovations: Continuous innovations are incremental, that is we perform them in the form of a loop. Moreover, we use existing models for their implementation. The bases of continuous innovations rely on existing knowledge from the industry and market approach. It does not challenge those approaches but strives to work with them. The visualization of the domain of continuous innovation is a circle consisting of the existing knowledge of the customers and the suppliers. Strategies for continuous innovation include portfolio planning, five forces analysis, and globalization through regional subsidiaries that stay close to customer needs.(William L. Miller, Langdon Morris; Aug’96) Continuous innovation is not sufficient for a company to succeed in the market. The market history represents this fact clearly. Joe Marone, Dean of Rensselaer Polytechnic Institute comments that there is an overwhelming emphasis on continual improvement but whenever we look at any successful company, which has emerged over the past thirty years in a technology related industry, we notice that during some period the company had to take some big leaps into very new product line to stay ahead. We know so much about continuous innovations and so little about managing discontinuous innovations. We could say that all the practices of continuous innovations are inappropriate for discontinuous innovations. Discontinuous innovation brings those conditions in to perspective that is only possible when we proceed from unconventional knowledge. Discontinuous innovation involves reinventing product features and therefore, it offers different attributes of the product with respect to functionality. Therefore, we can say that the domain of discontinuous innovation is outside the circle. The dynamic and exciting nature of discontinuous innovation is that it does not follow market norms. It emphasizes on going for the unconventional and untraditional approach. Once the innovation is successful, it reshapes the market and brings new possibilities into light. As I have mentioned earlier, the domain of discontinuous innovation is outside the circle, i.e. it looks outside defined boundaries by discovering new knowledge about market needs and technological advancements. 3. The Case There is no question about it, that LED or light emitting diodes consume less power than a normal light bulb and that is why they are also known as the future of lighting. A famous online shopping portal advertises Light emitting diodes with the banner that in order to save money people should switch from incandescent or CFL light bulbs because LEDs consume 1/3rd to 1/30th less power than the conventional bulbs1. The light consumption statistics of United States rightly indicates that the market would be definitely moving towards a cheaper technology such as light emitting diodes. Lighting consumes 22% of power, which is why this innovation seems the need of the hour. LEDs offer a life of 100,000 hours, which is far longer than the filament bulb. However, this technology still has some time to take over the market, which is why it is necessary to take the right decision now. Discontinuous innovation will likely affect the firm because obviously once LEDs become a normal thing in the lighting industry, their demand, supply is definitely going to increase, and their prices are likely to go down considering the advantages it is offering. Moreover, light bulbs are also incredibly inefficient. Conversion of energy to light happens to up to only 5%, while the rest is a total waste. “If 25% of the light bulbs in the U.S. were converted to LEDs, they would put out 150 lumens per watt the U.S. as a whole would be saving 150 billion dollar in utility costs and it would eradicate the need for building 133 new coal burning power stations.” (Prof. Steven DenBaars, Material Science, University of California Santa Barbara) Rising prices of electricity along with old-fashioned nature of light bulbs are indicating the rise of discontinuous innovation in the market. Now the question is what impact will it have on our company? 3.1. Impact of discontinuous innovation on the Competitors This slow but gradual shift of the market is indicating a total shift of technology that is bound to influence the conventional light bulb industry. Companies that are striving towards the innovation obviously are going towards domination in the market and earning maximum profit for a product. The company is going to lapse behind in technology, which would prove to be detrimental for its growth in the future. The acceptance of innovation, which is discontinuous in its nature, is an opportunity for any company and companies that grab it often have the advantage in the market. 4. Strategy for adopting discontinuous innovation If we can already see that there is a lot of acceptance for innovation in the market, we should ourselves move towards it. We should also consider the risks involved. Customer Input – We should identify that whether sufficient number of consumers exist for a product or not. Market Acceptance - Most important factor is market acceptance that in this case does not seem important as we can already see the market is already moving towards it very fast. Time - Another risk factor is time. Sometimes it takes plenty of years for an innovative product to give its true value. Inadequate supply-chain- Some products require a different approach towards selling as well and we should keep this in mind while introducing the product in the market. After taking a brief look at the risks, we realize that the risks in the current scenario do not seem to be detrimental. The next question inline is what should be the approach towards discontinuous innovation? We should adopt an appropriate strategy when moving towards as innovative policy. 4.1. Radical Cannibalism Radical Cannibalism is replacing one’s own successful products or services with new technology providing a better customer experience and satisfaction increasing the overall quality of the products or services of the company. An example of radical Cannibalism could be Ethicon, which is a subsidiary of Johnson & Johnson and the leader in medical stitching technology. Recently Ethicon has identified a major shift in the market because of a tissue adhesive recently approved by the FDA and that is likely to replace the stitching technology in the coming years. This shift poses a threat to the Medical Corporation’s Dermabond. Instead of losing the 80% share of the suture market, Ethicon has decided to venture out with Closure Medical and it plans to market and promote the revolutionary technology. This should also be the strategy of our company. Radical Cannibalism is going to save the company from the impact of discontinuous innovation in the market. Hypothesize obsolescence could be helpful in this regard. This means that we should consider scenarios of total corporate death. This is helpful in exploring potential opportunities. Exploring unconventional technologies, customer behaviors, competitive strategies, reveals new possibilities and opportunities. (Kaplan, S.M. (1999), "Discontinuous innovation and the growth paradox", Strategy & Leadership, Vol. 27 No.2) 5. Conclusion By looking at the current market trends and approaches towards innovation, I have concluded that light bulbs industry is moving towards discontinuous innovation. Why this is happening? The answer is simple. The competitive technology is better in all aspects. The manufacture of a product is successful if it is fulfilling the purpose of its design. LEDs offer this kind of success. They seem to be taking over the conventional light bulb industry of the future. The company should adopt discontinuous innovation and move towards a technology that can give LEDs competition and after complete technological and market analysis, if we find that no such technology exists then it should adopt the technology. 6. Cited Text "Discontinuous innovation and the growth paradox", Strategy & Leadership, Vol. 27 No.2, Kaplan, S.M. (1999) Retrieved on 23rd Feb’08 (http://www.innovation-point.com/article.htm) “Excerpt from: 4th Generation R&D Managing Knowledge, Technology, and Innovation”, William L. Miller, Langdon Morris Chapter 1, Page 4 Retrieved on 23rd Feb’08(http://www.innovationlabs.com/4Gpub2c.html) Tools for Discontinuous Innovation Research and Development”, Michael Ali Retrieved on 23rd Feb’08(www.innovationtools.com/pdf/Tools_4_Discontinuous_Innovation.pdf) “Expert: LEDs could start replacing lightbulbs soon” , Michael Kanellos, News.com Published on ZDNet News: Nov 3, 2006 Retrieved on 23rd Feb’08(http://news.zdnet.com/2100-9596-6132427.html) “Led Light Bulbs - Start saving money today with Led Light Bulbs!” Retrieved on Feb 23rd’08(http://www.earthtechproducts.com/energy-saving-led-light-bulbs.html) “Glossary of Marketing Terms” Retrieved on Feb 23rd ’08 (http://en.mimi.hu/marketingweb/discontinuous_innovation.htm) Read More